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Comcast's Cohen: Define Internet Fast Lanes

Mari Silbey
5/14/2014
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Comcast Executive Vice President David Cohen is certainly earning his pay these days.

Taking advantage of another forum to state his company's case on the open Internet debate, Cohen spoke at the inaugural MoffettNathanson Media & Communications Summit Wednesday morning. Covering issues that included paid prioritization, the interconnection market, usage-based billing, and market consolidation, Cohen made it clear that Comcast Corp. (Nasdaq: CMCSA, CMCSK) believes it is not only following the legal guidelines imposed by US regulators, but also the principles of the government's open Internet policy.

Federal Communications Commission (FCC) Chairman Tom Wheeler provoked an immediate and largely negative reaction last month when he proposed letting broadband providers create network "fast lanes" for bandwidth-hogging Internet video companies such as Netflix Inc. (Nasdaq: NFLX). But Cohen cautioned that the definition of a fast lane hasn't even been determined yet. (See Edgewater Reanimated by $5M for SDN/NFV.)

"We are not sure we know what paid prioritization, or what a fast lane is. No one's defined that," he said in this morning's conversation with telecom analyst Craig Moffett.

Moffett then clarified that Comcast's current commitment -- under the conditions that it accepted in exchange for approval of its acquisition of NBC Universal -- doesn't take paid prioritization into account at all. Cohen agreed. "Whatever it is," he said, "we're allowed to do it."

While Cohen was definitive about following the letter of the law, he was also careful to emphasize that Comcast isn't trying to get away with anything that goes against the spirit of the open Internet. He pointed out that even if strict Title II regulations were imposed on the broadband market, there would still be nothing to prohibit operators from providing different levels of service to different types of customers, just as they currently do when differentiating between business and residential subscribers. The premise of offering different types of service, in Cohen's view, doesn't violate the open Internet doctrine.

Speculating on Wheeler's upcoming Internet regulatory rulings, Cohen also guessed that the chairman would ultimately decide that paid prioritization deals have to be determined on a case-by-case basis, with "commercially unreasonable" agreements being deemed unlawful under regulatory review.

Neither Moffett nor Cohen spoke in detail about the current battle between Internet service providers and transit providers such as Level 3 Communications Inc. (Nasdaq: LVLT) and Cogent Communications Group Inc. (Nasdaq: CCOI). Transit providers have argued that some ISPs are deliberately allowing peering points to degrade to force transit partners to pay for better service. However, Cohen did say that he believes the cost of transport should be proportionate to actual usage. He added that the right way to manage overall costs is to move to a usage-based billing model for consumers.

Comcast is currently running tests of usage-based billing in several markets, including a pilot in Atlanta that was started late last year. Cohen said that so far the Atlanta trial has had no effect on about 98% of customers. He also argued that if the model is adopted universally in the future, he believes the same trend would hold true, with very few subscribers needing to pay monthly overage fees for exceeding a capacity threshold.

The entire conversation at the MoffettNathanson event comes within the context of both Comcast's proposed acquisition of Time Warner Cable Inc. (NYSE: TWC), and the FCC's plan to consider a Notice of Proposed Rulemaking on the subject of open Internet regulations. (See FCC's Wheeler: 'Internet Will Remain an Open Pathway' and In Cable We (Anti)trust.)

Although the rhetoric level is high, there are significant issues being hashed out within the public sphere. The debate continues tomorrow at the next FCC Open Commission Meeting.

— Mari Silbey, special to Light Reading

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Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
5/15/2014 | 1:58:40 PM
Re: What am I missing?
It's clear that there's a great deal of short term profitability potential for carriers making sweetheart deals for their own content and for providers. In the long term, a neutral net makes the Internet more desirable and useful and therefore creates more profitability potential for everyone. 
kq4ym
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kq4ym,
User Rank: Light Sabre
5/15/2014 | 1:18:51 PM
Re: What am I missing?
My take on Cohen's comments is that he's trying to be politically correct at the moment, but still leaving the door open for fast lane charges. On one hand he says he's for open internet but on the other says he's waiting on the FCC rulings and Comcast will be entitlted like every other provider to adopt new pricing,
Mitch Wagner
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50%
Mitch Wagner,
User Rank: Lightning
5/14/2014 | 7:52:05 PM
What am I missing?
I am hugely suspicious on the subject of net neutrality, but Comcast's proposal seems reasonable. Charge everybody based on usage. As long as everybody's charged the same rate -- but not necessarily the same amount -- then usage-based charges are perfectly fair, reasonable, and preserve competition and openness. 
KBode
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KBode,
User Rank: Light Sabre
5/14/2014 | 4:49:14 PM
Cohen
"Cohen said that so far the Atlanta trial has had no effect on about 98% of customers. He also argued that if the model is adopted universally in the future, he believes the same trend would hold true, with very few subscribers needing to pay monthly overage fees for exceeding a capacity threshold."

That would entirely depend on Comcast adjusting its caps to scale with usage demand, though. And since the entire purpose of imposing these caps and meters is to protect TV revenues from Internet video, I have an aching suspicion that won't be happening.
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